Sandy Adams Attends Leadership Oakland – 25th Anniversary Class

 

Sandy Adams, CFP® recently began participating in the 25th class of Leadership Oakland following in the footsteps of fellow partners Laurie Renchik, CFP®, and Timothy Wyman, The program is intended to help participants (about 50 each year) learn about Oakland County, our region and our state in order to be informed contributors and leaders within our communities.

Sandy recently attended a 2 ½ day retreat with 47 other professionals – all now her newest friends. The retreat, held in Roscommon at the R.A. MacMullan Conference Center, was the perfect place to set the stage for this unique learning experience. The group spent time getting to know more about Oakland County, each other and themselves and their leadership potential. For an insider’s look, here’s Leadership Oakland’s video of the retreat.

In future sessions, Sandy and the other participants will engage in experiential learning and hear from local leaders on topics including Economy & Government, Human Services & Non-Profits, Health & Environment, Diversity & Inclusion, the Justice System, Education, Arts & Culture, Shaping the Future, and last but not least, a class project that the 25th class hopes will have a significant and lasting impact on the community.

Leadership Oakland is not affiliated with Raymond James. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

A ROTH IRA Strategy for High Income Earners

Do you have a 401k Plan from your current employer?  Does it allow you to make after tax contributions (these are different than pretax contributions and Roth 401k contributions)?  If the answer to both is “yes”, a recent IRS notice may present a welcome opportunity.  IRS Notice 2014-54 has provided guidance (positive guidance) allowing the splitting of after tax 401k contributions to a ROTH IRA. Although I believe that ROTH IRAs are used in many less than ideal situations, this is one strategy that can make sense for higher income earners; tax diversification and getting money into a ROTH without a big upfront tax cost. 

After answering “yes” to the first two questions, the next question is, “Are you making maximum contributions on a pretax basis?”  That is, if you are under 50 years old, are you contributing $17,500 and if you are over 50 (the new 30) $23,000? If you are making the maximum contribution, then a second look at after tax contributions should be considered.  Whew – that’s three hoops to jump through – but the benefits might just be worth it.

Putting Notice 2014-54 to Work

For example, Teddy, age 50 has a 401k plan and contributes $23,000 (includes the catch up contribution) and his employer matches $5,000 for a total of $28,000.  Teddy’s plan also allows for after tax contributions and he may contribute $29,000 more up to an IRS limit of $57,000. 

The new IRS Notice makes it clear and simplifies the process allowing this after tax amount at retirement to be rolled into a ROTH IRA.

The bottom line:  It is more attractive to make after tax contributions to your 401k with the flexibility of converting the basis to a ROTH at retirement or separation of employment without the tax hit of an ordinary Roth conversion.

As usual, the nuances are plentiful and your specific circumstances will determine whether this strategy is best for you.  To that end, we are here to help evaluate the opportunity with you.

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a frequent contributor to national media including appearances on Good Morning America Weekend Edition and WDIV Channel 4 News and published articles including Forbes and The Wall Street Journal. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), trained and mentored hundreds of CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James.

The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. C14-033701

Elder Care Planning: Continuing Care Retirement Communities (CCRCs)

 In last month's post, we talked about Assisted Living as a housing option for older adults.  But do you know about CCRCs or Continuing Care Retirement Communities? CCRCs are an option for those older adults who have the financial means to support this type of housing. 

What is a CCRC?

In general terms, a CCRC is the most comprehensive of all housing options that can satisfy the needs/wants of those older adults who are healthy and active, as well as those who need assistance and those who need skilled nursing care.  The structure of these communities provides individual residences (usually in the form of an apartment or condo) for independent living, but provide options within the community for assisted living or nursing care. Once you move to the CCRC, you never have to move again!  CCRCs are not for the financially faint of heart – they generally require a buy-in/entrance fee and a monthly service fee.  However, most communities guarantee that once your are approved and have moved in, you will never have to leave, regardless of your future financial position,.

How, might you ask, do CCRCs look when we view them in the context of our 4 “C’s”(Comfort, Convenience, Companionship and Care)?

Peace of Mind and Comfort Knowing You Never Need to Move

As an older adult, making the decision to move from your home is a big one – one that you likely don’t want to make more than once.  Moving to a CCRC allows you to make that decision only once. No matter what needs you have as you age, they will be provided for in the CCRC.  You should make sure that you are aware of how possible transitions will work within the specific communities that you look at and the financial impact of each. Especially for married couples, there may be significant additional financial costs if one needs assisted or nursing care and the other remains independent.

Convenience of…everything!

CCRCs provide most conveniences of everyday living:

• Transportation if you can’t or don’t want to drive on your own.
• Activities – usually a full gym, clubs, social activities, classes and entertainment on community grounds, as well as organized trips off campus.
• Restaurants, banks and visits from dentist, eye doctors, etc. are generally available on campus.
• Services of all kinds are usually available (maintenance and cleaning for your residence; food plans so you don’t have to cook, etc.)

Companionship of All Kinds

In working with clients who live in CCRCs, I have found that they can always be around people and be busy…if they want to be.  The options available to interact with others that have similar interests are many…usually more than you have time for.  I have found that moving to these communities, for many, has resulted in an improvement in quality of life.

Care at Every Level

Ideally, you consider moving to a CCRC when you are completely independent and have no need for assistance, so that you can engage in all that these communities have to offer.  However, if and when assistance is needed, you can be certain that it will be available.  Assistance can be provided within the independent living units or within the community at a different location – every level of care can be provided for without another move being required.

If you or someone you know thinks they may need to look at the possibility of moving to a CCRC, I recommend (as always) to plan ahead AND to consult your financial planner to make sure that your finances are sufficient.   Please contact me if you need additional resources or have additional questions about this or other housing options.

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012-2014 Sandy has been named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Any opinions are those of Sandra Adams and not necessarily those of Raymond James. C14-028648

Dan’s Desk: The Legacy Revealed

When I saw Center founder Dan Boyce’s email offering up his desk and credenza, I knew what I had to do. This was in the summer, as The Center was preparing to move offices, and Dan was getting new furniture. I couldn’t stand to see such an iconic piece of Center history vanish into the night, so, without much hesitation, I went to Dan’s office to inspect the desk and see if I could make use of it.

A Desk with a History

As I expected, there was normal wear and tear from years of use. Dan had leaned over that desk in countless meetings with clients. He had signed off on too many documents to count. He may have even spilled a little coffee on it here and there. But that wasn’t the whole story. Dan told me he bought the furniture in the late ‘80s from his father-in-law, an attorney who’d used it for years as he worked as an attorney in Benton Harbor/St. Joseph. But he didn’t get it new. Dan’s father-in-law purchased it from his mentor, Charles Gore. Gore was also an attorney and had purchased it new in the ‘20s or ‘30s. This was a desk where business had been conducted for close to a century!

From Before to After

I felt confident with a little TLC I could restore the desk to its former glory. The project took me about three weeks. I sanded the desk down to the original wood and put a clear coat on it. I purposely didn’t stain it because I thought the underlying natural wood was beautiful. I’m really happy with the results and hope it will bring me the same mental acuteness it brought Dan throughout his career. I see myself pulling up a chair and sitting down behind the desk, making a difference in people’s financial lives just like Dan.

Where are we in the full market cycle?

Cycles exist everywhere.  One of the first cycles we learn about as a child is the water cycle or the journey of a raindrop. There’s something about the circularity of cycles that I just love.

The economy and financial markets also cycle. An economic cycle is the periodic ebb and flow of economic growth like Gross Domestic Product or employment.  According to the National Bureau of Economic Research the average economic cycle lasts a little less than six years.  This span is measured both from one peak to the next peak or one trough to the next trough.  While six years is an average, the cycle can be much quicker or much longer than six years. 

The Cyle of Economic “Seasons”

The various stages of the economic cycle can be thought of like seasons of the year as shown in the chart below.  From winter, or recession, where jobs are lost and the economy is shrinking to summer, where growth is accelerating and jobs have been recovered. 

Every quarter we take a poll at The Center to see where team members think we fall in this spectrum.  Our consensus is that we believe we are in the midst of summer meaning that this bull still has some room to go as we are still lacking some keys signs of a maturing economy like inflation and volatility.

Stock Market Cycles

The stock market also goes through cycles and, along with it, investor emotions ebb and flow.  Usually the stock market cycle is slightly ahead of the economic cycle meaning that market indexes often peak before the economic cycle peaks.  Our latest survey of our employees placed the stock market cycle near excitement in the picture below.  At this point (excitement/thrill/euphoria) investors start to question why they don’t have more aggressive positions because they have clearly performed very well and many even start to shift their portfolios in this direction.  As Warren Buffett said”

“Be fearful when others are greedy and greedy when others are fearful.”

Refocusing on the Long Term

This is the point when it is most important to stay in a diversified portfolio, not abandon your long-term investment objectives while reaching for more returns. Rebalancing at these market extremes may go against what investors want to do, for example, selling your stock positions to buy more bonds right now or selling your bonds in 2009 to buy more stocks. However, going against these basic emotions have potential to be the best decisions you can make for your portfolio.  Navigating these emotions is the single most difficult road block to the success of an investment strategy.  While markets and economies will cycle as long as water continues to cycle, having sound financial advice during these market extremes can make big difference in the success of your long-term financial plans. 

Angela Palacios, CFP®is the Portfolio Manager at Center for Financial Planning, Inc. Angela specializes in Investment and Macro economic research. She is a frequent contributor to Money Centered as well asinvestment updates at The Center.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Angela Palacios and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risk and investors may incur a profit or loss regardless of strategy selected. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Angela Palacios and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risk and investors may incur a profit or loss regardless ofstrategy selected. C14-031971

How Singles Can Use File and Suspend

 There are certain advanced social security income strategies available for married couples that can help to maximize income in retirement. It’s a different story for single people who have fewer opportunities to use some of these more advanced strategies.  But there’s a strategy called “filing and suspending” that may work for you, no matter your marital status. 

File & Suspend: Not just for married couples

This strategy is sometimes used by married couples because it allows for one partner to defer taking benefits and gain credits on their benefit for doing so. In the meantime, the other partner receives a spousal benefit. But if you’re single, there is no “spousal benefit” so the rationale for utilizing such a strategy is different.  A single person might use this strategy by filing for benefits retroactively.

Retroactive Benefit Payment Limits

Under the “normal” social security rules, those who are full retirement age can only file to receive back payment benefits retroactively for up to 6 months. For example, let’s say George plans to wait until age 70 to collect benefits so he doesn’t go through the process of filing and suspending those benefits. Then, at age 67, George changes his mind and wants to file and suspend. He is only entitled to receive a lump sum payment for the last 6 months of benefits that he could have received.  If George had filed and suspended benefits at his full retirement age and later changed his mind, he would be entitled to receive all of the benefits he would have been entitled to receive going back all the way to the date that he originally filed and suspended.

When File & Suspend Can Pay Off

Now you might be asking, “Why does any of this matter if my game plan is to wait until age 70 to collect benefits?”  Your skepticism is justified because in most cases it will make no difference.  However, in some cases, your health might change from the time you are 66 to 70. Then, it would make a lot of sense to go back to social security and ask for a lump sum payment for benefits you would have received from 66 to 70.  If you filed and suspended, you are entitled to get all of those benefits. If you didn’t file and suspend than you are only entitled to receive 6 months’ worth of back payments.

The rules surrounding social security are vast and very complex.  As with any complicated financial decision, it’s often best to seek the help of a qualified financial professional to help navigate the waters.

Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.

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The information contained in this report has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making a n investment decision and does not constitute a recommendation. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of RJFS or Raymond James. Examples are for illustrative purposes only. C14-028511

Our Workplace Wellness is Award-Worthy

Did you know we hold meetings while walking and when we’re working at our desks, we might be standing instead of sitting? It’s all part of our commitment to keeping The Center team healthy. That commitment has led to a 3rd healthy workplace award in less than a year. This time, we’re being recognized in Corp! Magazine’s online publication as one of Michigan’s Best and Brightest in Wellness. For Partner and Financial Advisor Sandy Adams, keeping our constant focus on health is one thing that makes The Center a great place to work.

For me, staying healthy and active gives me the energy and positive attitude to best serve my team and our clients. The Center is committed to helping our team stay healthy by providing us with education on health and wellness, providing equipment like standing desks and balance balls for alternative seating, and by encouraging standing or walking meetings.”

The Best and Brightest in Wellness awards will be handed out at a gala on October 2nd. The selection was based on an assessment by the wellness systems firm Wellco. We won this award based on criteria like wellness policies, healthy work environment, senior leadership support of health initiatives, and motivation.

Earlier this year we won a Healthy Workplace Award from the Governor’s Council on Physical Fitness, Health and Sports. And last December The Center was recognized as one of Michigan’s Healthiest Employers by Priority Health, Crain’s Detroit Business and MiBiz. In 2007, we launched an initiative to shape up our office. Looks like we’re on the right track.

Want to be a Genius when it comes to Retirement?

My friend* and fellow professional Marc Freedman, CFP® recently published his first book Retiring for the Genius®. The two subtitles capture the essence of the book: “Your Blueprint for Planning a Comfortable Retirement” designed “For the Genius in All of Us™”. I had the honor of providing a peer review during editing and, according to the Author’s Acknowledgement, provided “invaluable and honest insights.” Writing a book is an admirable undertaking and it was truly an honor and pleasure playing a very small role.

Retiring for the Genius® is very comprehensive, covering almost 400 pages of text. Marc addresses an enormous amount of content including social security, income taxes, designing retirement income, estate planning; Marc covers it all. Fortunately there’s an array of summaries, examples and “inspiration” tips to keep the material interesting and practical.  Marc accomplished his goal of providing meaningful content that we all can understand and implement. Give it a read.

*In the spirit of full disclosure, I need to define “friend”.  Marc and I are Facebook friends, and according to my three kids, that means in 2014 we are almost like family.  More importantly, we both served the Board of Directors of the Financial Planning Association and its 25,000 members about a decade ago. I came to honor his knowledge and passion for serving his clients and the financial planning profession. Congrats my friend!

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a frequent contributor to national media including appearances on Good Morning America Weekend Edition and WDIV Channel 4 News and published articles including Forbes and The Wall Street Journal. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), trained and mentored hundreds of CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. C14-026543

Investment Commentary - September 2014

Clients and Friends,

While much of our communications with you in the last few months have been about The Center’s recent move, our intensive investment focus is always present. The last few months were marked by many insightful conversations with portfolio managers and investment professionals. This reminds me that at our core, our investment process is focused on good old fashioned research whether it comes to the way we construct asset allocation mixes or how we select investments for your portfolios.

Here is some news for you from our investment team:

• We’re more than halfway through 2014 and the financial markets have picked up where they left off last year. Not only are stocks measurably higher this year, but bonds have made a rebound with positive returns as well. We’ve got a new one-page investment dashboard that sums up the current investment world. We’ll update this one-pager each quarter going forward. Let us know what you think of the new look and feel.

• Angie Palacios, CFP® provides a great recap of the Morningstar Investment Conference which is held in Chicago each June. This is a can’t-miss conference each year and 2014 was no exception. She includes notes about employment predictions for the US economy and focus on international as some of the key takeaways this year.

• Our quarterly investment pulse includes recaps from four meetings held here and around Detroit and highlights the extraordinary access we’re able to get to investment professionals because of size and reputation. I particularly enjoyed a meeting with Joseph Brennan and Lee Norton from Vanguard. The discussion was broad and interesting including how Vanguard, known for their preference for indexes, identifies active investment managers for their offerings.  With several other top-notch investors giving us time for lengthy discussion, you can see the quality of discourse we are privileged to entertain.

• Matt Chope shares insight from a conversation with one of his favorite investors – Charles de Vaulx – who is a portfolio manager with IVA.

Do you have investment-related questions for us? Please don’t hesitate to let me or your financial planner know. Thanks again for your trust and commitment to The Center for the opportunity to work with you to pursue achievement of your financial goals!

On behalf of everyone at The Center,
Melissa Joy, CFP®
Partner, Director of Wealth Management
CERTIFIED FINANCIAL PLANNER™

Melissa Joy, CFP®is Partner and Director of Investments at Center for Financial Planning, Inc. In 2013, Melissa was honored by Financial Advisor magazine in the Research All Star List for the third consecutive year. In addition to her contributions to Money Centered blogs, she writes investment updates at The Center and is regularly quoted in national media publications including The Chicago Tribune, Investment News, and Morningstar Advisor.

Financial Advisor magazine's inaugural Research All Star List is based on job function of the person evaluated, fund selections and evaluation process used, study of rejected fund examples, and evaluation of challenges faced in the job and actions taken to overcome those challenges. Evaluations are independently conducted by Financial Advisor Magazine.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Melissa Joy and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risks and investors may incur a profit or a loss regardless of strategy selected.

Is now the time for Active Management to shine?

 What is active and passive management?

Active management is an investing strategy in which investment professionals strive to outperform specific benchmarks. Passive management is an investing strategy that attempts to mirror the return pattern of a specific benchmark.

Can active managers actually outperform benchmarks?  The debate between active and passive management is not new, but in my research on these two very different management styles, I uncovered something that actually caused my jaw to drop.  I found research from Vanguard showing that just as markets are cyclical, there are cycles to management.  Sometimes active management wins, but passive management outperforms at other points, as shown in the chart below.  Over the past 10 years, every time interest rates went up (the orange line), the percent of active fixed income managers that beat their index also went up (the yellow line). 

Benchmark used: Barclays U.S. Government Bond Index

Over the past 10 years (and looking beyond this chart, the past 30 years) interest rates have been on a downward march, making it difficult for active managers to add value over their fees for a very long time.   There have been brief periods of rising rates though as shown in the chart above.  

What does this mean now for portfolios now?

Interest rates are near 30 year lows.  While I don’t believe they will go much lower they should soon start to trend upward…though it could be tomorrow, next month or a year from now.  A bet on passive investing in fixed income, at this point, is against the odds in an environment with such low and potentially increasing rates.  Active managers may have their chance to shine after what has seemed like a period of prolonged underperformance to their benchmarks.

Angela Palacios, CFP®is the Portfolio Manager at Center for Financial Planning, Inc. Angela specializes in Investment and Macro economic research. She is a frequent contributor to Money Centered as well asinvestment updates at The Center.

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Source: “The Active-Passive Debate: Market Cyclicality and Leadership Volatility”, Vanguard Research July 2014

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Every investor’s situation is unique and investors should consider their investment goals, risk tolerance and time horizon before making any investment decision. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Indexes are unmanaged and cannot accommodate direct investment. C14-027422